...University of Law and Economics Case Study 26 “JetBlue Airways IPO Valuation” Lecturer: Kou Lim Hong Prepared By: 1. Ms. Khoun Davy 2. Ms. Khoun Dalin 3. Ms. Chiem Sothana 4. Mr. Soksithika 5. Mr. Oag Sothearith 6. Mr. Mov Vandara MFM, Group 2 team 6 2011-2012 Outline of The Presentation I. II. Introduction of Case Study Main Problem III. Literature Review IV. Case analysis V. Conclusion Outline of The Presentation I. II. Introduction of Case Study Main Problem III. Literature Review IV. Case analysis V. Conclusion Introduction of Case Study JetBlue Airway Background JetBlue airways are a low cost airline established in July 1999 by David Neeleman. David Neeleman was experienced in the operations of airline and start up airlines. The airline was to provide new levels of service in the airline travel industry, concentrating on customer service and low fares. Introduction of Case Study JetBlue Airway Background David Neeleman plan was to commit to innovation in people, policies and technology to keep the companies planes full and thus the company profitable. To ensure this goal and the company’s future David Neeleman assembled and impressive management team and group of investors. JetBlue’s COO was to be David Barger ex-vice president of Continental Airlines. John Owen who was executive vice-president and treasurer of Southwest Airlines agreed to become JetBlue’s CFO. Introduction of Case Study JetBlue Airway Background David Neeleman...
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...JetBlue Hits Turbulence Case Study Question I. What types of information systems and business functions are described in this case? The information system described in this case is the Transaction Processing System (TPS) which is used to perform and record the day-to-day business transactions including reservations, paperless ticketing and baggage handling. JetBlue attempted to standardize its IT processes by utilizing a single vendor for its technological framework for all facets of its operations from logistics to passenger online booking tools. JetBlue’s mission was customer satisfaction and retention. From the beginning, efforts were made to attract passengers. E-commerce in the form of online ticket sales was a means of attaining customer satisfaction. Question II. What is JetBlue’s business model? JetBlue’s goal was to deliver airline a luxurious customer experience while operating at low cost. JetBlue’s technological expenses were approximately one-third of its competitor’s IT costs in spite of the fact that operations were extremely reliant on automated systems. This automation helped keep headcount low and union affiliation nil. Planes operated at or near capacity as customers were attracted to JetBlue’s leather seating, personal entertainment systems and paperless ticketing – all at lower fares than their competitors, albeit with arrivals and departures to second-tier airports. How do its information systems support this business model? JetBlue’s...
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...The case “JetBlue Airways IPO Valuation” outlines JetBlue’s innovative strategy and the associated strong financial performance over the initial two years, in order to determine the price of initial public offering of its stock on April 2002. To the whole industry of Airlines, the terrorist attacks of September 2001 caused a challenge, especially to large numbers of low-fare U.S. airlines. However, JetBlue remained profitable and grew aggressively. From 2002, the low-fare business model gained momentum in the U.S. airline industry. The dominant player among low-fare airlines, Southwest Airlines, has been going so successfully with its stable growth rate of revenue (Exhibit 8) and increasing operating margin forecasts (Exhibit 5). As a relatively new company, JetBlue had made significant progress in establishing a strong brand by seeking to be identified as a safe, reliable, low-fare airline. In addition, a solid Neeleman’s management team, with David Barger and John Owen joining, was formed to enhance the success of going public. Therefore, to support JetBlue’s growth trajectory, going public and raising financing for the company is appropriate at this moment. Going public has both advantages and disadvantages. Advantages The main purpose of going public is to increase capital for the issuer. A public offering would place a value on the company's stock and insiders who retain stock may be able to sell their shares or use them as collateral. Going public also...
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...Introduction: JetBlue is a low-fare airline established in 1999 by David Neeleman, a veteran in airline start-up. By adopting a high frequency, short-haul, point to point strategy that leverage on technology advantage, together with an experience management board. In April 2002, JetBlue Management decided to price the IPO of JetBlue at despite that it was during one of the worst periods in airline history. The IPO was initially priced at $22-24 per share, it was later adjusted to $25 to $26 per share due to excessive demand. On the first day of trading in April 2002, shares of JetBlue (JBLU) closed at $45, up $18 from the offer price of $27, a gain of 67% in one day. On August 1, 2013 JBLU closed at $6.59. The decision to go public As noted in the JetBlue Prospectus, the main purpose for the IPO is for working capital and capital expenditure. Hence, the decision to go public can be seen as a financing decision. Besides going public, the company may raise equity by private placement or through investment bankers and underwriters. However, there are several reasons to go public. First, going public is able to raise large amount of capital that may not be possible in other means. This is especially important as Airline industry is a capital-intensive industry and companies in their initial years has high asset growth. The total assets of JetBlue almost doubled from 2000 to 2001. Furthermore, going public is able to increase credibility, this is vital for an airline...
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...[pic] IPO Valuation By: Ryan DeCoudres & Jose Alessandro de Vasconcelos March 24, 2009 TABLE OF CONTENTS INTRODUCTION 2 COMPANY AND INDUSTRY BACKGROUND 3 GOING PUBLIC 4 THE IPO PROCESS 5 JETBLUE VALUATION 10 RECOMMENDATION 12 WHAT HAPPENED 12 REFERENCES 15 INTRODUCTION Following the terrorist attacks of 9/11, the airline industry was in the doldrums. Many of the largest carriers in the nation had filed for bankruptcy protection and were asking the federal government for help so they could survive. Certainly few people at this time considered the airline industry to be an extremely profitable venture, but where others saw despair, David Neeleman, CEO and founder of JetBlue Airways, saw opportunity. In 2002, after 2 years of profitable operations and less than a year after the attacks that shook the industry to its core, JetBlue Airways had its Initial Public Offering (IPO) and went public. This case study outlines the IPO underwriting process and uses JetBlue as an example to describe the steps throughout the way. It also asks the analyst to come up with a valuation for this IPO, based on the financial and non-financial data presented. In the following pages, we will discuss the pros and cons of going public, the IPO process itself, and walk through the calculations that led us to our...
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...JETBLUE AIRWAYS IPO VALUATION Teaching Note This case examines the April 2002, decision of JetBlue management to price the initial public offering of JetBlue stock during one of the worst periods in airline history. The case outlines JetBlue’s innovative strategy and the associated strong financial performance over its initial two years. Students are invited to value the stock and take a position on whether the current $25–$26 per share filing range is appropriate. The case is designed to showcase corporate valuation using discounted cash flow and peer-company market multiples. The epilogue details the 67 percent first-day rise in JetBlue stock from the $27 offer price. With such a backdrop, students are exposed to one of the well-known finance anomalies—the IPO underpricing phenomenon—and are invited to critically discuss various proposed explanations. The case provides opportunities for the instructor to develop any of the following teaching objectives, • Review the institutional aspects of the equity issuance transaction. • Explore the costs and benefits associated with public share offerings. • Develop an appreciation for the challenges of valuing unseasoned firms. • Hone corporate valuation skills, particularly using market multiples. • Evaluate the received explanations of various finance anomalies, such as the IPO underpricing phenomenon. Study Questions 1. What are the advantages and disadvantages...
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...Brian Williams 560 MGMT Case Analysis #1 JetBlue Introduction JetBlue Airways was founded in 1998 by former Southwest Airlines employee, David Neeleman, The company looks to utilize similar cost savings techniques as Southwest and has even improved, expanded and added some. In addition, JetBlue has attempted to offer differentiation in service to improve the customer experience. Unlike most pointtopoint airlines, JetBlue decided to add a second airplane model in order to expand into the regional flights. A deal was struck to purchase up to 200 jets from Embraer through 2016. The growth the company forecasted was soon realized to not be in the best interests of the future of JetBlue. In 2006 the company executives discovered that the the time it would take in order to just achieve breakeven cash flows with the growth model at that time was much longer than originally anticipated. This, along with dramatically rising fuel costs, meant a new plan would have to be implemented in order to slow growth. In 2007, newly appointed CEO David Barger had to design a way to reduce growth even further. What needed to be decided though was which jets to cut, and how much of each. the A320 was the model that built JetBlue and the aircraft that had proven its success in the past. The E190 provided a new unique opportunity and a niche market that JetBlue may be able to take great advantage of. ...
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...Case Outline of JetBlue Airways Corporation I. Problem: The main problem facing JetBlue Airways Corporation is: how to maintain low-costs structure and continue enlarging its market share in the competitive airline industry with increasing fuel costs. II. Strategic Considerations A. Industry Analysis 1. History a). American aviation pioneers attempted to start airlines using airships in the mid-19th industry. b). Aktiengesellschaft was world’s first airline which was founded in November 16, 1909 with the government assistance, and operated airships manufactured by Zeppelin Corporation. c). Tony Jannus conducted the United States’ first scheduled commercial flight on January 1914. d). In 1918, the United States Postal Service won the financial support from Congress to begin air mail service. e). In 1925, Stout Aircraft Company began to construct Ford Trimotor with 12-passenger capacity which became the first successful American airliner. f). At the same time, Pan American World Airways created an air network that linked America to the world. g). At the end of twenty century, a new style of cost airline appeared, offering a no-frills product at a lower price. The representative low-cost carriers are Southwest Airlines, JetBlue and AirTran Airways. h). The September 11th terrorist attacks resulted the airline industry bailout which lost $30 billion with 100,000...
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...Professor Samir Moussalli MGMT499 November 18, 2010 Analysis Conducted by PSPS Associates Outline I. Management Summary II. Introduction a. Purpose b. goals III. Background IV. Strategy Formulation a. Vision b. External Opportunities & Threats c. Internal Strengths & Weaknesses d. Long Term Objectives e. Alternative Strategies f. Strategy Selection V. Strategy Implementation a. Annual Objectives b. Policies c. Employee Motivation d. Resource Allocation VI. Strategy Evaluation a. Internal Review b. External Review c. Performance Measurement d. Corrective Action In this analysis of Jet Blue Airlines, we will take an in-depth look at the internal and external factors surrounding the operation and continued success of the airline. We will reveal the opportunities, both internally and externally. As well as expose threats that could potentially...
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...Welcome to Strategic Human Resource Management Course Number: MBA 786 School of Business & Technology University of Wisconsin - Parkside 6:00 - 9:15 p.m. Wednesdays, Molinaro 167 October 29 – December 17 Fall Semester 2008 “…if we are to have citizens who can live constructively in this kaleidoscopically changing world, we can only have them if we are willing for them to become self-starting, self-initiating learners.” Carl Rogers Contacting the Instructor Professor: Dr. Karen Crooker Phone/Voice Mail: 595-2348 (worst way to contact) Office: Molinaro 349 Fax: 595-2680 (label to my attention) E-mail: crooker@uwp.edu (best way to contact) Address: UWP, Department of Business, PO Box 2000, Kenosha, WI 53141-2000 Web page: http://uwp.edu/~crooker/ Office hours: 3:15 – 4:30 p.m., Mondays & Wednesday. Other times by appointment. Course Description Using human resource management systems to create and sustain competitive advantage. Emphasis on an integrative framework that requires linkage between, as well as consistency among, functional HR activities and their alignment with and reinforcement of the organization’s competitive strategy. Course Objectives The goal of this course is to help students develop their knowledge, skills, and abilities in the following areas. At the conclusion of this course, students should be able to ✓ Name competitive...
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...basic administrative problems in business and industry. The course will address global, technological, ethical, social, environmental, political, demographic, and legal issues in strategic decision making. METHODOLOGY: Lecture, cases, and a business simulation will be used in the class LEARNING OUTCOMES: The student will be able to: A) identify, explain, and demonstrate the general concepts, principles and terminology of management through active class discussions; develop a strategic problem solving approach via the Strategic Audit through class discussions of cases; B) develop oral and written skills through written tests, class discussions, and case assignments; C) integrate the various disciplines of management, marketing, finance, accounting, and other sub-disciplines through their application in case situations: and D) Present current events in business and evaluate and discuss them in accordance with management concepts. CLASS ATTENDANCE: In order to get the maximum benefit from Management Problems, you must read the assigned materials prior to the class meetings so that we can jointly and actively participate in the class discussions. THIS IS CRUCIAL FOR A CLASS SUCH AS THIS ONE WHICH FOCUSES ON CASE ANALYSIS. In that...
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...Airline Cost Performance IATA ECONOMICS BRIEFING No 5 An analysis of the cost base of leading network airlines versus no-frills, low-cost airlines (LCCs) IATA Economics Briefing No 5: AIRLINE COST PERFORMANCE Mark Smyth Brian Pearce IATA, July 2006 Contents 00 Executive Summary 01 Introduction 02 The Low-Cost Challenge 03 Airline Cost Performance for US Airlines 04 Airline Cost Performance for European Airlines 05 Airline Cost Performance in Asia and South America 06 The Cost Efficiency Challenge 07 Service Quality – The Other Side of the Equation 08 Conclusions 09 Foreword by Giovanni Bisignani page 03 page 04 page 10 page 12 page 16 page 22 page 28 page 32 page 36 page 40 Appendix A Appendix B 00 Foreword Every airline is now a lower-cost airline. The worst financial crisis in the industry’s history over the last five years has forced all carriers to achieve cost efficiencies and higher productivity if they are to survive. Significant progress has been made in reducing non-fuel costs and in improving the efficiency of fuel use, but the challenge is on-going and central to the future prosperity of the industry. While network airlines have made significant progress in restructuring their cost base, they are often faced with a moving target. Low barriers to entry to the industry, combined with national or regional deregulation, have seen 1 new or restructured no-frills, low-cost operators...
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...Marketing Plan Tabitha Blount, John Greene, Nicole Noe, Marva Weeks and Tracey Ysordia MKT/421 September 30, 2013 Dr. Michael E. Ricco MBA, DBA Introduction In 1930, American Airways was first founded and had flights from their hub in Dallas to Boston, Chicago, New York and Los Angeles. American Airlines Inc., formerly known as American Airways, is a US airline owned by AMR Corporation. As one of the leading airlines in the United States, their available flight routes are both domestic and international. In February 2013, American Airlines and US Airways announced plans to merge, which would create the largest airline in the world. The combined airline is set to carry the American Airlines name and branding; the new publicly traded holding company will be named American Airlines Group Inc (American Airlines, Inc, 2008). With the merging of the airlines, American Airlines is looking to the future for continued profitability and to continue success with customer satisfaction. Description of New Service American Airlines, Inc. will introduce the AirPad and also the AirPad, Jr. The new product lines will be available on all flights. The rentals are free for Business Class travelers and those in coach will be charged a $15 or $10 if they reserve in advance. The AirPad product lines will have access to a large selection of movies, television shows, interactive and kid friendly games. They will also offer a variety of magazines and books that can be rented during the flight...
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...The Airline Industry: A Strategic Overview of Southwest Airlines Terra Thompson Ohio Dominican University Running head: SOUTHWEST AIRLINES 1 The Airline Industry: A Strategic Overview of Southwest Airlines Terra Thompson Ohio Dominican University SOUTHWEST AIRLINES The Airline Industry: A Strategic Overview of Southwest Airlines Table of Contents 2 The History of Southwest Airlines ................................................................................................. 3 Target Market and Business Model ................................................................................................ 3 Current Product............................................................................................................................... 4 Southwest’s Culture ........................................................................................................................ 5 Mission Statement .......................................................................................................................... 5 Mission and Corporate Culture....................................................................................................... 6 Employees and the Mission ............................................................................................................ 7 The Importance of the Mission Statement and Corporate Vision................................................... 7 Strategic Analysis .................
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